Microsoft-Yahoo Deal: Where Do We Go From Here?

As of Wednesday last week, the dance is over. Microsoft and Yahoo entered into a 10-year search-and-advertising agreement that effectively takes the latter out of the search business and finally makes Microsoft a search contender. What does this mean for the search field? And what does this mean for SEO?

To get the answer to these questions, we need to take a closer look at the deal itself. It seems as if it’s being covered nearly everywhere, but Search Engine Land and SEOMoz provide especially good information on the details and tease out the significance. Much of my summary will be taken from these two sources.

Basically, the agreement grants Microsoft a 10-year license to Yahoo’s core search technologies. The software giant can, if it chooses, integrate the venerable search engine’s technologies into its own. Meanwhile, Yahoo has agreed to, in effect, get out of the search engine business. Once the deal is finalized (and it is subject to regulatory approval), every time you search on Yahoo, it will be Microsoft’s search engine – now named Bing, and formerly known as Live and MSN – that actually delivers the results.

Yahoo will still handle the user interface for its own search engine, so it should still look like you’re searching on Yahoo. Or it will when the deal closes, which is expected to happen some time in early 2010.

But wait, there’s more. Both companies are also integrating their paid search technologies. They expect to complete this step about a year after integrating their free search technologies, or some time in 2011 for the major countries. The full transition, when all results showing up on Yahoo (free and paid) will be powered by Microsoft, should be completed by early 2012.

There’s a certain poetic irony to this story, as Vanessa Fox observed. Writing for Search Engine Land, she pointed out that in 2002, Microsoft didn’t have its own search index; it used Inktomi instead. But Yahoo bought Inktomi, so Microsoft started building its own index to keep from having their search supplied to them by a competitor. Seven years later, Yahoo is now ditching the index they bought – to use the index it forced Microsoft to build because of that purchase.

If Jerry Yang were dead, I’m fairly certain he’d be spinning in his grave over this agreement. His well-known hatred for everything Microsoft meant that he turned down a deal in which the software giant would have bought the company he co-founded lock, stock and barrel. This refusal led to a stockholders’ rebellion at Yahoo, whose stock price had been in the doldrums for quite some time.

When Yang co-founded Yahoo, it was a search directory rather than an actual computerized engine for indexing web pages. It grew into a portal, and later an engine. In its current incarnation, it is far more than a search engine. It is a content provider, a portal, and so much else that one wonders how the company itself can keep track of everything.

In fact, according to Yahoo CEO Carol Bartz, search isn’t even the main thing that Yahoo does anymore. “We want to invest in what is really important to our future success, including winning audience properties, display advertising capabilities, and mobile experiences,” she noted at a press conference about the deal. Yahoo may not be a leader in search anymore, but “We’re the largest online media company in the world. We’re number one in news, sports, and finance, and a leader in key entertainment properties,” Bartz pointed out.

As it happens, Yahoo is also a leader in display advertising, and it is holding on to that. In that area, it will continue to compete with Microsoft; both companies will maintain a separate display advertising business and sales force. On the other hand, when it comes to premium search advertisers with both Yahoo and Microsoft, it’s Yahoo’s sales force that will take over worldwide relationship sales for both companies. (Self-serve advertising will go through Microsoft’s AdCenter automated auction process).

But let’s get back to Yahoo’s various properties and services. The company provides free e-mail; a free IM service; a music service; a toolbar (of course); a small business site that offers not just useful content but web hosting, business e-mail, and more; a sports site; a job-hunting site (HotJobs); and a slew of social media and networking sites and services, such as Yahoo Answers, Flickr, Yahoo Personals, and on and on and on. Some sites and services are free, while others are paid. Yahoo will be keeping these.

Or at least, it’s thought that Yahoo will be keeping these. As ReadWriteWeb observed, the company has a large list of properties that fall under the umbrella of search. Take Delicious, for example. It’s social search. Where does that fit in?  And then there’s Yahoo’s Build Your Own Search Engine (BOSS) service. Will such services simply go away after the transition to Microsoft Bing? At this point, it’s not entirely clear; we may see this decided over the course of the next two years on a case-by-case basis. In answer to a question from ReadWriteWeb, though, Yahoo said that many of these are consumer-facing search-related services that “are not or are no longer formally part of the Search Department.” That may sound mildly reassuring, but it by no means leaves their future any more certain.

In one sense, at least, Microsoft will get what it has wanted for years when the deal goes through: significant market share in the search arena. In one fell swoop, the software giant will become a solid number-two player. How much that number two position is worth when Google holds something like 78 percent of the worldwide search advertising market remains to be seen.

Microsoft will also gain the benefit of Yahoo’s technology – and human resources. The people-poaching widely reported in the media may serve as an advantage under this deal, as both companies now have employees that are at least somewhat familiar with the way the other side operates. The most prominent such employee, Qi Lu, worked for a long time at in search advertising at Yahoo before going to Microsoft.

Aside from the people, Microsoft also may inherit an attitude, so to speak. Yahoo truly is an innovator, with things like Yahoo Pipes, SearchMonkey, the Yahoo User Interface (YUI) library, and a wide variety of open source projects. Microsoft, meanwhile, is perhaps the leading producer of proprietary software – and certainly its leading spokesperson. It wasn’t all that long ago that Steve Ballmer and company tried to spread fear, uncertainty and doubt (FUD) about the performance of open source software in businesses. Will Microsoft nurture the innovative projects at Yahoo, or will they squash them like they’ve squashed (or tried to squash) so much else?

What Microsoft does depends on how it views the deal. While Bartz and Ballmer have been talking “partnership” in the press conferences, if you read between the lines, you get the sense that the software giant definitely considers it to be more of a takeover. So unless someone at Yahoo goes to bat for those technologies, Microsoft just might do whatever it wants with them – up to and including getting rid of them.

If the software giant is wise, though, they won’t. Microsoft has tried, slowly and hesitantly, to make some peaceful overtures toward the open source software community. This deal could give the company the opportunity to score some real credibility with that community, if it will just keep its hands to itself.

I went somewhat afield in discussing open source issues, so let me swing back to the question that’s probably on most of your minds: what does it mean for the SEO field? Will this deal make optimizing web sites easier or harder? Since Google will remain the leading player even after the deal closes, can’t you just keep doing what you’ve been doing?

The short answers are: change, both, and hell no. SEOMoz provides an excellent run-down of how this deal changes things; I’ll be touching on some of the most important points here. First, if you’ve been ignoring Bing up until now, that has to stop. The deal may not be fully completed for two years, but that’s plenty of time for you to learn how to optimize for Bing. And make no mistake, Bing’s results and what it rewards differs from both Yahoo and Google. The good news, according to SEOMoz, is that Bing traffic seems to convert better and click on more ads. With a larger market share, learning how to SEO for Bing will pay off.

Unfortunately, you may be doing this with less information at your fingertips. If you use Yahoo’s advanced search queries and Yahoo Site Explorer, you may find yourself looking for other sources of link information. SEOMoz thinks these will go away when Bing takes over Yahoo’s search results. You may find yourself working with less rich data sets, or even paying for data you used to get for free.

If you want to make up some of that potential information deficit, you’ll want to open an account with Bing Webmaster Tools. It’s not Google Webmaster Tools, but to all accounts it’s getting better, and it may give you some clues as to how Google and Bing see your site differently. Speaking of opening accounts, to get your name out there more, you’ll want to register with Bing Local if you’re doing anything with local search.

Certain “economies of scale” will come into play in both good and bad ways after the deal goes through. As you would expect, Bing will draw from a larger pool of queries, which means it will have a lot more data on people, which should improve the search experience for users (aside from making privacy advocates nervous). On the minus side, a larger company is a larger target; you can expect spammers and search results manipulators to run rampant until the chaos from the deal dies down. It may be worse than Google for a while; SEOMoz notes that the “loopholes that Google’s closed will still likely be open on Bing for some time to come.”

The bottom line? While there may be one less search engine competitor in the field, SEO just got somewhat more complicated, not less. It will be months before we learn the full ramifications of the deal, but it’s not too early to start learning Bing’s language now.

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